The Collapse of Amaranth Advisors

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Case Details:

Case Code : FINC063
Case Length : 18 Pages
Period : 2000-2009
Pub. Date : 2010
Teaching Note : Available
Organization : Amaranth Advisors
Industry : Investment Banking
Countries : US

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Background Note

Amaranth Advisors LLC (Amaranth) was founded in September 2000 in Greenwich, Connecticut, by Nicholas Maounis (Maounis) as a hedge fund. Before he began Amaranth, Maounis had had experience in managing a variety of arbitrage accounts in the US, Japan, Europe, and Canada...

Risk Management

In Amaranth, there was an exclusive risk manager for every trading book, who sat with the risk takers on the trading desk. The risk managers were well qualified and had advanced degrees. The objective of employing a risk manager for each trading book was to have an in-depth understanding of the positions and the associate risks that Amaranth's traders were taking...

Hunter's Bets

Amaranth's trading positions in the natural gas market were taken through several types of derivative instruments like futures, spreads, options, and swaps. As of September 2006, it had investments in instruments with maturities ranging between October 2006 and October 2011...

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